ARBOR OUTLOOK: Beijing to Pittsburgh to 30A: Emerging market stress

By Margaret R. McDowell

Published: Thursday, March 28, 2013 at 05:18 PM.

Imagine the consternation and dismay of South Walton residents if the carcasses of 13,000 pigs were found floating in the Choctawhatchee River, headed for the Gulf. Such was the recent plight of residents who live near the Shanghai River in the Chinese city of the same name. Indeed, the process of transitioning from an emerging market to a developed nation is not without its difficulties.

Peaceful, pastoral communities in southeastern China, towns with breathable air, exert a powerful psychic pull on the 20 million or so residents of Beijing in northern China, a city with arguably the worst air in world history. One small province is now purchasing television advertising encouraging citizens to leave the polluted cities and return to their peaceful little agricultural province. The commercial touts verdant green hillsides and breathable air as enticements.

Many of China’s problems mirror issues that plagued the U.S. during our own industrial revolution, but of course, China’s changes are on a grander scale. Think of the U.S. Rust Belt on steroids.

A recent report from NPR states that pollution in Beijing is so dense that drivers frequently cannot see the car directly in front of them. A doctor interviewed on NPR says that simply breathing daily in Beijing is the equivalent of smoking two packs of cigarettes a day. Some residents and schools have begun building bubbled domes with air filters over their living space to improve breathing conditions. The Economist reports that pollution readings earlier this year have been staggering, even by Beijing standards.

“On January 12th … Beijing residents … suffered a day of astonishingly bad air,” writes an Economist reporter. “Pollution readings went, quite literally, off the charts … Those previously unseen numbers were hard to believe, but they did seem to match well enough with the noxious soup we could see, smell and taste outside.”

Not in our back yard, right? It’s easy to forget that the soot in Pittsburgh was at one time so pervasive and thick that it blackened the faces of all its downtown residents and turned day into night. Alexis Madragil of The Atlantic writes, “As America became an industrial power during the 19th century, Pittsburgh emerged as the seat of metalworking, iron and then steel…Soot and smoke covered the city. There was no blue sky. Travelers from around the world visited Pittsburgh to see the wonder of American capitalism. The stories they tell are like — exactly like — the ones you hear today about China.”

Madrigal also writes, “Another traveler recounted, ‘Everybody who has heard of Pittsburgh knows that it is the city of perpetual smoke, and looks as if it were built above the descent to ‘the bottomless pit,’ that is to say, hell. And yet, this dirty power also happened to make a lot of people a lot of money.’ ” The article also notes that Pittsburgh “did not enact smoke controls until 1946.” Pittsburgh was described in 1868 by Boston writer James Parton as “hell with the lid off.”

Imagine the consternation and dismay of South Walton residents if the carcasses of 13,000 pigs were found floating in the Choctawhatchee River, headed for the Gulf. Such was the recent plight of residents who live near the Shanghai River in the Chinese city of the same name. Indeed, the process of transitioning from an emerging market to a developed nation is not without its difficulties.

Peaceful, pastoral communities in southeastern China, towns with breathable air, exert a powerful psychic pull on the 20 million or so residents of Beijing in northern China, a city with arguably the worst air in world history. One small province is now purchasing television advertising encouraging citizens to leave the polluted cities and return to their peaceful little agricultural province. The commercial touts verdant green hillsides and breathable air as enticements.

Many of China’s problems mirror issues that plagued the U.S. during our own industrial revolution, but of course, China’s changes are on a grander scale. Think of the U.S. Rust Belt on steroids.

A recent report from NPR states that pollution in Beijing is so dense that drivers frequently cannot see the car directly in front of them. A doctor interviewed on NPR says that simply breathing daily in Beijing is the equivalent of smoking two packs of cigarettes a day. Some residents and schools have begun building bubbled domes with air filters over their living space to improve breathing conditions. The Economist reports that pollution readings earlier this year have been staggering, even by Beijing standards.

“On January 12th … Beijing residents … suffered a day of astonishingly bad air,” writes an Economist reporter. “Pollution readings went, quite literally, off the charts … Those previously unseen numbers were hard to believe, but they did seem to match well enough with the noxious soup we could see, smell and taste outside.”

Not in our back yard, right? It’s easy to forget that the soot in Pittsburgh was at one time so pervasive and thick that it blackened the faces of all its downtown residents and turned day into night. Alexis Madragil of The Atlantic writes, “As America became an industrial power during the 19th century, Pittsburgh emerged as the seat of metalworking, iron and then steel…Soot and smoke covered the city. There was no blue sky. Travelers from around the world visited Pittsburgh to see the wonder of American capitalism. The stories they tell are like — exactly like — the ones you hear today about China.”

Madrigal also writes, “Another traveler recounted, ‘Everybody who has heard of Pittsburgh knows that it is the city of perpetual smoke, and looks as if it were built above the descent to ‘the bottomless pit,’ that is to say, hell. And yet, this dirty power also happened to make a lot of people a lot of money.’ ” The article also notes that Pittsburgh “did not enact smoke controls until 1946.” Pittsburgh was described in 1868 by Boston writer James Parton as “hell with the lid off.”

Pittsburgh is not an anomaly. The air in Los Angeles has failed to meet federal air standard regulations for the last 60 years.

Our local Metropolitan Statistical Area was named recently as the third fastest growing in the U.S., and Walton County is statistically one of the five fastest growing areas for retirees in the country. As new residents and growing tourism strain infrastructure and alter the caliber of the experience of daily activities, one wonders how local governments will cope with a growing demand for services.

The ability of emerging market nations to simultaneously develop their economic prowess and create livable, human conditions in their greatest centers of population is a testament to urban planning, good government and a collective will.

So, are China and other emerging market nations with environmental and developmental challenges a good opportunity for investors? The answer is yes. However, our preference is to invest in carefully selected equities of American companies with broad, global appeal to emerging markets like China. These emerging markets are growing a solid middle class, one that desires to purchase Western products and seeks to emulate Western lifestyles.

As these emerging market nations evolve, more and more of their working class citizens will be lifted into a consumptive middle class.

Margaret R. McDowell, a Chartered Financial Consultant and Accredited Investment Fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121~www.arborwealth.net), a “Fee-Only” Registered Investment Advisory Firm located near Sandestin. Arbor Wealth specializes in portfolio management for clients with $250,000 or more of investable assets.